Joint Bidding in Common Value Auctions: Theory and Evidence

Vlad Mares and Mikhael Shor ()
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Vlad Mares: Olin School of Business

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Abstract: We examine theoretically and experimentally two countervailing effects of collusion and symmetric mergers among bidders. On one hand, the pooling of information within bidding rings increases the precision of competing estimates. We demonstrate that, in average value auctions, this leads to more aggressive bidding. On the other hand, since collusion decreases the number of active bidders, competition is lessened, reducing the price paid at auction. We demonstrate that the reduction in competition dominates the informational effects, resulting in lower prices. We examine these hypothesized e®ects experimentally by conducting a series of auctions with constant informational content but a varying number of bidders among whom this information is distributed. The experimental results are consistent with our theoretical predictions for different value and auction mechanism specifications.

Keywords: common value auctions; mergers; collusion; information (search for similar items in EconPapers)
JEL-codes: D44 L41 C92 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
Date: 2003-05-12
Note: Type of Document - Acrobat PDF; prepared on IBM PC - MikTeX; to print on PostScript; pages: 29 ; figures: included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0305001

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